The Hershey Company (HSY) Q2 2024 [Q&A] earnings summary

Executive summary

• Q2 2024 net sales were $2,074.5M, down 16.7% year-over-year, mainly due to lower U.S. confection volume, planned inventory reductions, and ERP implementation timing, partially offset by salty snack growth and favorable pricing.

• Net income for Q2 2024 was $180.9M, a 55.6% decrease from Q2 2023, with diluted EPS at $0.89, down 55.1%; adjusted EPS was $1.27, down 36.8%.

• The company is implementing a 6-7% net price increase, phased in over late 2024 and 2025, to address historic cocoa inflation, with expectations of normal price elasticity.

• Salty Snacks portfolio showed growth, especially Dot's, while Confectionery faced declines due to inventory and shipment timing.

• Management expects second-half innovation, merchandising resets, and seasonal strength to drive category momentum and long-term success.

Financial highlights

• Gross margin for Q2 2024 was 40.2%, down 530 bps from Q2 2023, due to unfavorable commodity costs, business realignment, and mix; adjusted gross margin was 43.2%, down 200 bps.

• Reported operating profit was $287.8M, down 48.7%; adjusted operating profit was $383.5M, down 32.8%.

• SM&A expenses decreased 5.4% in Q2 2024, driven by lower advertising and compensation costs.

• Effective tax rate for Q2 2024 was 26.4% (reported), up from 7.4% in Q2 2023, impacted by state taxes and tax reserves.

• Six months 2024 operating cash flow: $894.7M (down $155.1M year-over-year).

Outlook and guidance

• Full-year guidance reflects a 200 basis point decline in gross margin, with more commodity inflation and a dilutive seasonal mix expected in the back half.

• 2024 net sales growth outlook updated to ~2% (prior: 2–3%); reported and adjusted EPS now expected to be down slightly.

• Back half performance is expected to be stronger, driven by merchandising resets, seasonal sell-in, innovation, and salty snack momentum.

• Capital expenditures for 2024 are expected to be $600M–$625M, focused on confection capacity and digital infrastructure.

• No increase in retailer inventory is assumed for the back half; shipment visibility is based on innovation, easier laps, and seasonal factors.